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Friday, December 25, 2015

LONDON: Forget the financial fortress of London, anyone looking for Britain's best stock-picker this year should have hopped on a train north to Manchester.

Based out of a nondescript office block in a city more famous for football and factories than finance, Keith Ashworth-Lord's 28-million-pound ($42 million) fund is tiny compared with many peers in Britain's 6.6-trillion-pound investment industry.

As suggested by the name of his fund - Sanford DeLand UK Buffettology - Ashworth-Lord seeks to emulate the investment style of Warren Buffett, the world-famous U.S. investor known as the Sage of Omaha.

That is about two percentage points ahead of the next best-performing fund, according to the data that covers the 262 funds in the industry's "UK All Companies" sector, comprising those that invest at least 80 percent of their assets in British shares.

Ashworth-Lord's returns also top the performance of Buffett's own Berkshire Hathaway <BRKa.N> investment vehicle, which is down 11.7 percent in the same period.

The trademarked "Buffettology" method - laid down in a series of books - is not backed by Buffett himself. It was formulated by his former daughter-in-law, Mary, and David Clarke, a member of the Buffettologists - a group of early Berkshire Hathaway shareholders who studied his strategy.

Ashworth-Lord's fascination with the famed U.S. investor stretches back to the mid 1990s, when he made several trips to the Berkshire Hathaway annual conference in Omaha, Nebraska – on one occasion being granted a private audience with the man himself after being mistaken for a journalist.

"I was fishing around for an investment view, and landed on the teachings of Buffett and (Berkshire Hathaway colleague) Charlie Munger, and their disciples the Buffettologists," said Ashworth-Lord, who is in his 50s.

"Me and my business partner at the time went off on the Buffettology train tracks like a pair of zealots."

He launched his fund in 2011, after receiving a call from Clarke, who was looking for a fund to license the Buffettology trademark to.

"I didn't need persuading – it's a very competitive market and it gives the fund its point of difference," said Ashworth-Lord, an astrophysics graduate who has spent most of the last 30 years working in the corporate investment industry.

'ECONOMIC MOATS'

Buffett's decision to run Berkshire Hathaway from the U.S. Midwestern city of Omaha is reflected in Ashworth-Lord's decision to avoid London as a base for his fund.

"I have always preferred to work away from the rumor mill. It gives me the freedom to think," said the fund manager, who has lived in Manchester for most his life.

While Ashworth-Lord is far from the first person to try and emulate Buffett – fellow UK managers Nick Train of Lindsell Train and Fundsmith's Terry Smith are both fans – he is the only one in Europe to use the Buffettology name to help market a fund.

The Buffettology method, based on the teachings and investment advice of the U.S. investor, broadly involves buying into companies with strong market positions, growth potential, management teams and cash generation.

Eschewing the large team of analysts favored by bigger funds, Ashworth-Lord is a one-man team running a portfolio of around 25 stocks. All, he says, have "economic moats" – a term used by Buffett to refer to firms with unassailable advantages, through intellectual property, branding or employees' unique skills.

Given it is several hundred times smaller than the biggest UK equity fund – the 4.2 billion pounds AXA Framlington Select Opps fund - Sanford DeLand's fees are higher than many peers, at 1.38 percent of assets a year, compared with 0.55 percent for rival Train's UK Equity fund.

But staying small allows it to invest in companies with smaller market values, according to Ashworth-Lord who believes such stocks have the best potential for long-term growth.

Given that, his aspirations next year for Sanford DeLand, which he named after two towns he drove past while on holiday in Florida, are rather modest.

"It would be nice to hire one or two people, but I don't think it will ever end up being a mega-fund."